America is in serious debt

May 26, 2008|By Carl J. Kunz, Jr.

Personal debt, if not controlled, can be a debilitating ailment. Foreclosures, bankruptcies, short sales, etc., have received much attention lately and although those affected represent only a small portion of the population, it's a sad situation. Government's ability to act in such crises is limited. It has no cookie jar or pot of gold in the ground. Money spent on any aid is beyond government's role in society as it only transfers this debt unfairly to the general public with increased public debt.

The stimulus package, which has received unprecedented expeditious attention by both Congress and the administration, will have trivial effect on the foregoing and is expensive. Ninety percent or more getting these freebies are not in financial trouble. Those who are will not be rescued with $600 or $1,200. The only solution is the payment of their debt.

If the main intent of the package was to increase the growth of the economy, one has to ask where does this $150 billion giveaway come from? Answer, it comes from dollars borrowed from American or foreign investors who purchase government securities. The American investors merely swap dollars. We deplete the economy of many dollars when we purchase the debt instruments as we put back in with the package. It's a wash which offers no solution for either problem, only more debt, $150 billion more, hardly insignificant. The only beneficiaries are the investors.

This concept, used before, to stimulate economic growth by money infusion through tax reductions was the same scenario. Money taken out and an associated debt offset the infusion. This concept, inspired and endorsed by many known economic advisors, is a hoax and it's the main cause of the magnitude of the spiraling public debt that presently exists.

All entities have a debt limit. Countries are not exempt. Review history. Many will say this can't happen to the United States. Don't be complacent. Our country is heading to a point of no return. It's like HIV - when you know, it's too late. If at some time inflation establishes a 10-plus percent return on debt obligation bonds, the interest alone on the public debt will consume the entire personal income tax. It's the same problem homeowners face with adjustable rate mortgages. The government has an adjustable rate debt, but unlike homeowners, it can't convert to a longterm fixed rate loan. Good management!

Reality. No one, regardless of claims and despite promises, can currently balance the federal budget. This position will be vigorously disputed for political reasons, but the numbers speak for themselves. The $450-plus billion debt interest payment makes this virtually impossible. Further, reducing deficits solves nothing because "any size" deficit compounds the problem by increasing both debt and interest expense. Also, any program to reduce the public debt makes balancing the budget even more impossible.

In the interest of solvency, we must agree to pay off the entire public debt, which is possible. Same solution as above, pay off the debt. It will solve many problems and allow budgeting for needed new programs. Fortunately, as opposed to Bear Stearns, our country is currently in a position to be able to pay off the entire public debt. The current personal wealth in our country is around $60 trillion. An extraction of $9.3-plus trillion from this wealth in a fairly structured wealth tax will shed no blood. This action is within Congressional authority and those involved have pledged to oblige.

It's disappointing that none of our presidential candidates have recognized the seriousness of our large public debt and proposed some solution to prevent a catastrophe, should they be elected.

Expectations. Don't let them exceed reality. It's been said, when government fails, we must turn to the electorate. Stand up and be heard. It's not someone else's job!